Forty Thieves Testing The Bottom Line Again (Alibaba IPO)

Alibaba once again applied to float in Hong Kong for the second time. Jack Ma Yun, chairman of the group’s board and founder of the company, cooked up the “partnership structure” so that he could retain his full control over the future listed entity. He also issued his final warning to the Hong Kong Securities and Futures Commission (SFC), demanding the SFC to accept this bizarre structure which has never been seen in any of the key exchanges in the world. According to Ma, there are 28 partners in Alibaba and the system has been running smoothly for three years.

The so-called “partnership structure” is similar to the Nomination Committee of Hong Kong Chief Executive. These partners are from the company’s management, and the nomination rights of the company’s board are controlled by these individuals. Any average shareholder will have no say in the appointment of the company’s board. This is essentially adopted the small circle election in the political space into the corporate environment. There is no such “partnership structure” across all stock exchanges around the world. The only structure that resembles it is the dual-class share structure which was once used in Hong Kong, Europe and US. However, as the market demands better corporate governance and that such structure leads to an over-concentration of shareholder rights which indirectly led to companies’ failure, the application of this structure is in decline.

Commenting on the dispute over “partnership structure”, Ma said “(We) do not care where the company will be listed, but the market that Alibaba goes public at should support this open, innovative and responsible culture.” I find this peculiar so went to do some research on what type of openness and responsibilities Alibaba had before it delisted from Hong Kong. It seems that Alibaba is nothing but a thief that robbed the minority shareholders, and left nothing but tears to them. Alibaba went public in 2007 at a high offer price. After its flotation, global financial crisis and average business dragged the company’s share price to bottom. Until it delisted last year (2012), the company purchased the shares from minority shareholders at the original IPO price. Agnes Wu Mang-ching, a local stock commentator, was furious about it.

Naming his company Alibaba is ingenious! Alibaba and the forty thieves! Although Ma is regarded as a high profile entrepreneur in China with sophisticated “financial skills”, but his comment “We don’t care where the company will be listed” does sound very familiar.

Alibaba listing in Hong Kong is a blessing to the people of Hong Kong and a gift to Hong Kongers. If it were not for Alibaba’s openness and innovation, Hong Kong would have been long dead. Alibaba took good care of the people of Hong Kong once in 2007, it has to take responsibilities and take care of Hong Kongers again!

This is the classic Chinese arrogance. Alibaba went public at a time the stock market was red hot in 2007, and raised substantial capital from shareholders at a high price. Then, it bought back those shares from the shareholders at a super low price with excellent “financial skills”, and privatised the company. Ma’s tens of billions of wealth essentially came from the small independent investors in Hong Kong. Ignoring the established system in the global financial market; the nouveau riches’ attitudes when fronting the market continues to demand better corporate governance and presents oneself as a generous giver. This type of attitude and behaviour keeps appearing these days, which many of us are sick and tied of.

Speeding up the opening up of Shanghai is not the fastest way for Shanghai to become an international financial centre and replace Hong Kong. The fastest way is to steal it from Hong Kong. When SFC hears the magic words “sesame open”, before opening the door, look careful and see whether it was Alibaba or the forty thieves who casts the spell.